Poland to Benefit from EU Defence Financing Support, but Fiscal Deficit to Remain Wide

In our view, Poland, rated "A", Stable Trend, is set to benefit from the EU's common defence strategy (ReArm Europe/Readiness 2030). In order to bolster European defence capacity and to prioritise national defence spending, EU-fiscal rules are temporarily loosened, and national defence investments are supported with EUR 150 billion of financing support (SAFE). We foresee that Poland--currently the biggest defence spender in NATO--will benefit from cheaper EU loans and from higher investments into its national defence sector, as procurement from the European defence industry is now prioritized. But looser EU fiscal rules in Poland's case will likely lead to a more gradual fiscal consolidation over the next few years compared with current commitments.

"Poland, as a frontrunner in European defence spending, is set to benefit from financing under the EU's common defense initiative," said Marius Schulte, Assistant Vice President in the Global Sovereign Ratings Group. "At the same time, we expect Poland's fiscal consolidation to slow over the next years as fiscal rules have been loosened for higher defence spending."